There was nothing in the speech (when it comes to tax – which is the sole focus of this post). An increase in GST was already very likely – but the government wouldn’t even commit to it. Given that it isn’t going to be finalised in size or scope until the May budget, and given that the they want to compensate by changing tax rates it is likely they won’t introduce this until March/April 2011.
Note: I’ve heard rumours they would change GST in October. Increasing GST just before Christmas, with no compensation, and coming out of a recession with elevated unemployment is what I would term moronic. As a result, it can’t be ruled out 😉
No land tax, no capital gains tax, probably some fiddling around depreciation rules (although that wasn’t even pointed at in the speech), all implies that the government isn’t really that serious about ensuring property is treated the same as other capital investment.
I heard today that we were going to hear about “significant changes to the tax system”, something about a “step change”. Other than the possibility of a slight shift from income to consumption taxes there was nothing in this speech. To be honest, it makes me laugh a little 😛
Update: The more I think about it, the more this speech implied a STEP BACK from the MINOR adjustments that everyone already expected.
No mention of LAQC’s, no mention of changes to the treatment of depreciation on property, no commitment to a GST rate change, no aims to flatten the income tax scale per see (as the higher GST would be fully compensated).
A lot of (waffly) talk about investment and minor fiddles with benefits – which aren’t the purpose of this post, but which indicates how tax reform DOESN’T HAVE A PRIORITY in terms of the governments thinking.
In reality this speech has shown that this government is less willing to change issues that have been illustrated with the tax system then we believed before the speech. That was a surprise, given how little was expected in the first place 😉
Update 2: So it wasn’t a “major economic reform” in the tax sense. But yesterday he did say:
Mr Key said the details of any changes would not be revealed before the Budget in May, but his speech would spell out the Government’s overall economic programme for the year.
That isn’t as bad. The speech didn’t have any details, that is true. However, it didn’t really spell out much in terms of tax changes either.
When it is put in this context it feels like there wasn’t supposed to be much too it – so I don’t feel as bad about it as I did. However, there are two major negatives still:
- it means we will have to wait until May until we have any sort of “certainty” around tax policy – that is not a good thing for the economy.
- The things I said above still hold – expectations of tax change are now lower than they were, and the things that weren’t mentioned will be analysed as much as the things that were! As a result, this increases uncertainty MORE, as well as indicating that any changes may be smaller than the policy changes suggested by specialists.
Update 3: For those who are interested in the wider social policy discussions, opinions, and other tax stuff look:
Also everyone else is grading it so I better. C+ for catching an increase in GST and not putting in a tax free threshold. However, it loses marks for creating uncertainty and not balancing expectations – both serious issues with such a speech (and really polices in general).